Chapter 12 Economic Growth -...
Transcript of Chapter 12 Economic Growth -...
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 12.11
CHAPTER 12
Economic Growth
12.1 The PPF, Economic Growth, and
Productivity
12.2 Living Standards and Labor
Productivity Growth
12.3 Issues of Technological Change
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CHAPTER 12
Economic Growth
Why do surgeons earn more than barbers, and accountants earn
more than file clerks?
Why is the standard of living so much higher in some countries
than in others?
How can a nation boost its standard of living?
Why is the economy’s long-term growth rate more important than
short-term fluctuations in economic activity?
What is labor productivity, and why has it grown faster in recent
years?
Consider
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LESSON 12.1
The PPF, Economic
Growth, and Productivity
Use the production possibilities frontier
to analyze economic growth.
Define labor productivity, and discuss
what can increase it.
Objectives
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LESSON 12.1
The PPF, Economic
Growth, and Productivity
standard of living
productivity
labor productivity
human capital
Key Terms
physical capital
capital deepening
rules of the game
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The PPF and
Economic Growth
The production possibilities frontier shows alternative
combinations of goods that the economy can produce
if available resources are used efficiently.
An outward shift of the production possibilities frontier
reflects economic growth.
The economy grows because of a greater availability of
resources, and improvement in the quality of
resources, technological breakthroughs that make
better use of resources, or improvements in the rules of
the game that enhance production incentives.
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Economic Growth Shown by Outward Shifts
of the Production Possibilities Frontier
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Capital and Growth
The amount of capital produced this
year will affect the location of the PPF
next year.
To invest in capital, people in the
economy must save more now.
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Productivity
The standard of living is an economy’s
level of economic prosperity, best
measured by the value of goods and
services produced per person.
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Labor Productivity
Productivity compares total output to a
specific measure of input.
Labor productivity is the output per unit
of labor.
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Human and Physical Capital
Human capital is the accumulated
knowledge, skill, and experience of the
labor force.
Physical capital, or capital goods,
includes the machines, building, roads,
airports, communications networks and
other manufactured creations used to
produce goods and services.
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Capital Deepening
An increase in the quantity and quality of
capital per worker is called capital
deepening.
Capital deepening contributes to labor
productivity and to economic growth.
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Rules of the Game
Formal and informal institutions that
provide production incentives and
promote economic activity
Laws, customs, and conventions that
encourage people to undertake
productive activity
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LESSON 12.2
Living Standards and
Labor Productivity Growth
Explain why there is such a difference among
countries in the standard of living.
Evaluate the record of U.S. labor productivity
growth, and explain why even small
differences in growth rates are important.
Objectives
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LESSON 12.2
Living Standards and
Labor Productivity Growth
industrial market countries
developing countries
Group of Seven (G-7)
Key Terms
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Standard of Living
Industrial market countries
Developing countries
Education and economic development
Group of Seven (G-7)
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U.S. Labor Productivity
and Output Per Capita
Record over the long run
Slowdown and rebound in productivity
growth
Output per capita
International comparisons
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Long-Term Trend in U.S. Labor Productivity
Growth: Annual Average by Decade
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U.S. Labor Productivity Growth
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U.S. Real GDP
Per Capita Since 1959
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U.S. GDP Per Capita as Compared
to Other Major Economies
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LESSON 12.3
Issues of
Technological Change
Discuss the impact of research and
development on the standard of living.
Explain the relationship between technological
change and employment levels.
Describe industrial policy, and argue for and
against its use.
Objectives
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LESSON 12.3
Issues of
Technological Change
basic research
applied research
industrial policy
cluster
Key Terms
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Research and Development
Basic research
Applied research
R&D comparisons across countries
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R&D Spending as a Percentage of GDP for
Major Economies During the 1980s and 1990s
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Technological Change
and Employment Levels
Technological change and labor
productivity
Technological change and employment
levels across countries
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Industrial Policy
Government involvement
Identifying industry clusters
Pitfalls of picking technological winners